A Fully Neoclassical Model with Endogenous Growth

This paper presents a simple Neoclassical Growth Model in which technological change is endogenous, despite its simple structure and reliance on all standard Neoclassical assumptions. The only relevant difference between this model and the most popular original models is that firms pursue an inter-temporal optimization, which assures that their current decisions affect their future productivity. As a consequence, to invest in technology becomes a rational decision of firms. Therefore, this model stresses another intuitively important source of technical progress and endogenous growth, inter-temporal links among decisions by firms in their struggle to become relatively more efficient.